The CEO of the world's oldest bank is reportedly under investigation for market manipulation

FLORENCE, Italy (Reuters) - The chief executive of Monte dei
Paschi di Siena , Fabrizio Viola, and the Italian bank's former
chairman, Alessandro Profumo, are under investigation for alleged
false accounting and market manipulation, a source with knowledge
of the matter said.

The investigation, which started in 2015 following complaints
filed by small shareholders and consumer associations, comes as
the Tuscan bank prepares to launch a 5 billion euro ($6 billion)
stock sale after emerging as the weakest bank in Europe in
industry stress tests in July.

A spokesman for Monte dei Paschi said the decision to investigate
Viola and Profumo followed a proposal by two shareholders to seek
damages from the two executives which was rejected by other
shareholders at an April meeting.

"(Under Italian law) prosecutors are bound to open an
investigation when they receive a complaint," the spokesman said
in an emailed comment.

Being placed under investigation in Italy does not imply guilt
and does not automatically lead to charges being laid.

The source said on Thursday prosecutors in Siena alleged the bank
did not correctly book two derivatives trades known as Alexandria
and Santorini between 2011 and 2014.

The inquiry was transferred to prosecutors in Milan in July. They
now have 18 months to decide whether to shelve the investigation
or seek trial for Viola and Profumo, the source said.

Siena prosecutors could have chosen to close the case, the source
added.

Reuters' calls to the prosecutors' offices in Milan and Siena
went unanswered.

The health of Italy's third-largest lender poses a threat to the
wider banking system, the savings of thousands of small savers
and also to the weakening political standing of Prime Minister
Matteo Renzi, who faces a make-or-break constitutional referendum
in the autumn.

Viola and Profumo were drafted in at Monte dei Paschi in 2012 to
turn it around after it wrecked its balance sheet by overpaying
on the purchase of rival Antonveneta in 2007 and engineering
risky derivatives trades.

Profumo, a veteran Italian banker formerly at UniCredit , stepped
down as Monte dei Paschi chairman in August last year after
overseeing two cash calls in 2014 and 2015 which raised a total
of 8 billion euros.

Shares in Monte dei Paschi are trading at record lows, after
losing around 86 percent of their value since the bank completed
its last share sale in June 2015.

In January, Milan prosecutors sent to trial 13 former managers at
Monte dei Paschi, Nomura and Deutsche Bank in a separate
investigation into the two derivatives as well as a hybrid
financial instrument used to partly finance the 2007 acquisition.

All the managers involved and the banks have denied any
wrongdoing.

Prosecutors have said the bank's former management entered
Alexandria and other derivative trades to conceal losses after
stretching its finances to buy Antonveneta for 9 billion euros.